Insmed Incorporated (INSM) Earnings Call Transcript & Summary

Hey, everybody. This is Marty Auster. I'm the Lead SMID Cap Biotech Analyst here at Crédit Suisse. Welcome again to the 29th Annual Crédit Suisse Healthcare Conference. I'm joined by Will Lewis, CEO of Insmed. Will, super happy to have you here.

Glad to be here.

This is the name I've been covering for, I don't know, 2.5, 3 years now. And really enjoyed the whole process so far. We'd love to kind of get your perspectives and kind of frame around. It feels like you've been on a long hike, and we're finally getting to a place with a great view. What do you...

I appreciate that as a metaphor. I would tell you that I think it's fair to say that where the company is today versus where we were a year ago, is just night and day. And if you think back a year ago, 1009 wasn't part of the story really. It was -- there was a lot of work going on there, but we didn't have the answers even in the preclinical setting. 1007, I used to define as a lottery ticket. And my expectation there had been that we would find a subsegment of that market that might be compelling to bring forward. And for ARIKAYCE, we did not yet have what we have today, which is European approval and proximity to Japanese approval and launch in those territories, in addition to the continued strong performance in the U.S. refractory market. Say nothing of the initiation of the trials for non-CF bronchiectasis and frontline and 1009 in Phase I. So night and day difference. We're well resourced to go after all of this. And if we look forward to where we're going to be in just a short period of time, each of these 3 channels that we're pursuing represents a lot of potential impact on patients and consequently, shareholder value.

Well, there's a few kind of discrete segments to talk about in a little more depth. We can make a Will's choice. We can start with the commercial business.

Well, let me go to the direction that a lot of people have been taking me, which is starting with brensocatib because that's been the focus of a lot of our one-on-ones today and in the past several months. This is a drug, as everyone knows, that we in-licensed from AstraZeneca. We did a very robust Phase II study, looking at its potential role. This is DPP1 inhibition. So once-a-day small molecule reversible DPP1 inhibitor that we were looking at to break what is effectively this cyclical process of bronchiectasis in patients. This is a very prevalent disease for which there is nothing approved. And our Phase II data was very compelling. Had both primary endpoints. One of the doses hit -- one of the secondary endpoints was statistical significance, which was not what we expected. And that result was found to be so compelling that the New England Journal picked it up, quite an extraordinary thing. And we sit here today, well on our way for that Phase III trial, which is going to be a 10-milligram arm, a 25-milligram arm and a placebo arm, looking at the treatment of non-CF bronchiectasis in patients who have at least 2 or more exacerbations in the prior year and looking at frequency of those exacerbations as the primary endpoint. So we're really excited about this trial. We're getting it going as fast as we can. I'm extremely proud of the work that the team and the company has done on this trial in getting it off and running. And we have a very ambitious goal in the first quarter of next year to open literally hundreds of sites around the world. And so we'll be looking forward to seeing how that unfolds. Because this opportunity is excited as I have been by the commercial performance of the ARIKAYCE team and the potential in Europe and Japan and the frontline opportunity this program, obviously, just in sheer numbers of patients is many multiples in size. But the beauty is that they overlap a lot. And so there's a lot of synergy there. There's a strategic rationale for these 2 programs being under our roof that is very solid.

So I would agree, this is probably the asset that gets the most inbound. This is kind of what leads people to Insmed and gets them wanting to dig in and really understand what the company is all about. And I would agree with you, also, it's probably -- it's your largest opportunity in terms of population and kind of commercial value. One of the common themes of discussion here is looking at the Phase II data, it's unprecedented in non-CF bronchiectasis what you've been able to demonstrate in terms of reduction of exacerbations. But this is still an endpoint that kind of got high variance around it. It's a little unpredictable. It's not quite as -- there's easier endpoints out there than reducing exacerbations of bronchiectasis. Can you just kind of talk through what you're implementing into this Phase III to kind of just control risk as much as possible because that seems to be where a lot of the questions are is how do I think about probability of this trial? I know there's an element of placebo risk, there's an element of just trial risk in the setting. What can the company do to kind of control for that and kind of bring that out or as low as possible?

Yes. So I think it's a great question. The first thing we did was to go and study prior trials in non-CF bronchiectasis to learn what other companies have done, what they did well, where they made mistakes and to incorporate that, starting with our Phase II program. So examples of that include a very strict definition of exacerbations themselves to include a physician's input on that decision. So that's an important criteria that needs to be maintained and will be pulled forward into Phase III, same definition. The second thing we did was to make sure that patients had enough events. So 2 or more exacerbations within the last 12 months, but then for purposes of statistical powering, estimating a conservative estimate on how many of those exacerbations would show up during the time of the trial. And that conservative estimation allows us to see whether or not our drug is having impact. And in the case of this 6-month Phase II trial, we did see that impact. We saw a 40% reduction. So this was not an incremental impact on what is a variable measure. We saw a statistically significant impact at both the 25-milligram and 10-milligram doses on time to pulmonary exacerbation and at 10 milligrams, the secondary endpoint of frequency of pulmonary exacerbation with a near hit on 25. So I think what that suggests is that this mechanism clearly has impact. We included all the forest plots, right, to show that it was all variety of patients coming in and that gives us a great deal of comfort as we look at Phase III, that this drug has impact across the board regardless of etiology, where this comes from, and we're going to change as little from Phase II to Phase III as possible, adding only time and numbers of patients to what were the identical entry criteria to give us the highest probability of success. And the biggest difference between us and prior trials that have failed is we tested in Phase II, what you need to hit in Phase III. The other trials never did that. So we already know we're going to hit the -- we should hit the endpoint that is being measured in Phase III.

Got it. Excellent. And then this is a mechanism, maybe you could talk a little bit more about targeting neutrophil elastase. But in terms of the potential for that mechanism more broadly outside of bronchiectasis and the ability to kind of develop incremental shots on goal and turn this -- we cover other companies who have this kind of feature where you can kind of take an anchor indication and expand around it. If you could talk maybe a little bit about where you're out in the process of identifying some places to kind of explore proof of concept? Are there any pathways where there's a relatively quicker way kind of to do that? How far away are we from kind of understanding the potential for this drug outside of bronchiectasis? And then maybe from there, we'll talk a little bit about the rights in asthma and COPD, which are held by your partner, Astra?

Yes. So just taking a step back, this year, we have dedicated ourselves to really owning the DPP1 pathway and to learning as much as possible about it, and in particular, this drug's application of that DPP1 inhibition and that pathway in various disease states. We start on that quest with non-CF bronchiectasis. We just talked about the Phase II going into the Phase III trial. Understand that the addressable market for that, we think, includes a meaningful percentage of COPD patients. So of the patients that are out there, the literature, not our estimates, but the literature suggests somewhere between 4% and 54% of COPD patients in the U.S. have bronchiectasis. Just to give you the raw numbers, that's between 650,009 million patients. Right now, people think of the bronchiactisis market that's diagnosed at the moderate to severe level is around 250,000. So our ability to reach into COPD comorbid patients and identify them as bronchiectatic unlocks an enormous amount of value, and this becomes a very important part of our strategy as we go forward. So we're going to spend a lot of time learning about that aspect of the addressable market for non-CF bronch. Beyond that, the mechanism of inhibiting DPP1 and inactivating the 3 neutrophil serine proteases, one of which you mentioned neutrophil elastase, which we think is particularly important in non-CF bronch is but 1 of the 3 main ones that are impacted. Cathepsin G and proteinase 3 are also reduced, and we see that in the dose-dependent fashion in our Phase II data. What could that mean? It could mean benefit in other disease states like cystic fibrosis, where patients who are taking the Vertex drug and get effectively pretty close to cure of their CF basically emerges a bronchiectatic patient. High neutrophil elastase levels, and they should be very responsive to this drug. Similarly, there are other disease states we're looking at, and we have some early data in those. We've mentioned rheumatoid arthritis, lupus nephritis, GPA, all of these have different logic around them. I'm not suggesting we're going to go forward in all of them, but we certainly are going to do -- rely on our strong research team to do additional work validating the nonclinical models so that we can protect the IP and really own this pathway and then consider how best to exploit that over time.

Should we expect to see some proof-of-concept activity kind of commence in 2021? Is that a realistic target? Or how long do you think it will take you to kind of work through your decision list?

No. I think we have a pretty good feeling about where we want to go. CF is high on that list.

Okay. That's helpful.

To really tease that out, we want to work in a lot more detail on the protocol that might be involved. Just to go maybe a little more refined level, CF patients process metabolize drugs a little bit differently. And consequently, it's important to understand what is the effective dose equivalent for a CF patient of a 10- and 25-milligram kind of administration or a 40-milligram, depending on what dose we bring forward. So PK modeling is really important in that patient population, and that would be a necessary prerequisite, I think to moving forward. So we're looking at some of that work immediately. We're also looking at protocol designs and regulatory dialogue. And I think we'll have more to say definitively about whether we would move forward in that area by sort of first half, middle of next year. But it would be our intention if we did reach a positive conclusion there to push forward aggressively. I don't think that data clinically would come out before the non-CF bronch results, but we do think it is an easy and additional path that we would want to make available to ourselves and for the patient's benefit this drug, which we think would be very effective. We'll look at others as well. And in parallel, we may bring others forward. But for right now, I think it's a lot of work in the research labs and a lot of commercial assessment and clinical assessment of how we would bring this forward.

Got you. AstraZeneca has the right to kind of develop through proof-of-concept Phase IIb in COPD and asthma. Can you comment on where those development paths are? You mentioned COPD specifically, that seems to be a really -- obviously, really high area of unmet need as well as kind of a very obvious place to take an DPP1 inhibitor product. Can you comment on kind of where the development path lies now? Have there -- do you have a sense of when clinical trials could commence? Or if I may, something has commenced and I missed it, but...

No. Nothing's commenced that I'm aware of. I would say that we've had a very productive series of dialogues with them. I think we share the same ambition, which is to make sure the maximum number of patients that can benefit from this medication are able to do so. My perspective on that is initial enthusiasm over the notion that those patients who are diagnosed with COPD and are bronchiectatic once they're diagnosed as -- the primary diagnosis is bronchiectasis, we know that we can treat them under our label. So we know that those patients who can benefit from the drug will be able to do so. And that's a meaningful percentage of the COPD population. So we're excited that this trial, we're going to be running will be able to enable us to address that population. Might there be other populations? Certainly. And I think 1 of the interesting things we're going to be continuing to explore is, are there regions of the world where perhaps we're not building an infrastructure where they have expertise, where there could be an opportunity. So we'll continue our dialogue with them. I'd say it's been very productive. We have a lot of respect for them. And clearly, the ambition to help as many patients as possible with this drug is 1 we share.

Is there -- I know from the exercise of the option, they have the right to develop further than those indications. Is there any sort of kind of time line around those that put some pressure on to actually move forward and begin to kind of enroll those studies and generate that data?

Yes. I wouldn't be in a position to, as you appreciate, comment on what may be going through their mind. I think we share that mutual ambition to get a drug that may benefit patients into the market as quickly as possible. And so what can be done that makes sense is certainly something we want to enable.

Okay. And so I'll kind of turn to ARIKAYCE for a few minutes and then close up with TPIP. On ARIKAYCE, I think since the launch, it was 1 of the best rare disease launches that I think anyone has seen and then it kind of ran into some challenges earlier this year with Medicare governmental issues and then with COVID. I guess I was curious of the assets I follow anyways, I think ARIKAYCE has been more tied up with COVID than almost anything else I'm covering. So how did your team -- how did Roger perceive the vaccine news yesterday? And was there a side of relief being breathed about the return to normalcy potentially by -- maybe by mid next year or something like that? How important is that?

Yes. I think -- yes. I don't -- here's what I would say about that. I think everyone breathed the side relief because of the arrival of the vaccine potentially. And of course, the implication that others are probably going to be approved as well or would hope to have data that is compelling. Light at the end of the tunnel for the COVID situation is something I think everybody can take a victory lap on particularly in this industry because I think that we've really tried to step up and contribute in every way we can. When that day comes, I think it will materially alter the ease with which we can return into the marketplace and help the patients who have refractory NTM, MAC, which is on label for our drug. That process may be some months away just because of the logistics of getting the vaccines and so on out there. But in the meantime, kudos to the commercial team for their excellent performance in being able to find ways to reach these physicians and help them help their patients by initiating patients on drug, continuing to support patients on drug. And you saw that in Q2, and that carried through into Q3 the dynamic there with what was basically a flat quarter-over-quarter performance was the areas opened in Q2, closed in Q3 and vice versa. And so what that tells me is that our commercial capabilities across the country are universal that we have strength in all areas of the country because it took a lot to be able to make that happen. And I'm particularly pleased that we have that because I think it speaks to this franchise being rock solid. There are a number of drivers for why I feel like this franchise has its best days ahead. And they include the fact that there's a paper that's been written that talks about how to manage through the adverse events that are sometimes associated with this drug. The inclusion in the guidelines with a strong recommendation for use in refractory MAC patients, and most recently, our sNDA approval, which allows physicians to describe to their patients what they will get at the other end of the proverbial rainbow for taking these drugs over time. We can show in that sNDA now that durable culture conversion data. And all of that helps people understand better why it's important to treat the way the guidelines call for and what the benefit will be to the patient. So COVID is a problem. It definitely tamps down our ability to amp up our new patient starts, but the balance of the franchise, I think, is steady and solid.